Case studies of Chinese ODA in the Philippines
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COMPROMISING THE RULE OF LAW: Case studies of Chinese ODA in the Philippines
Transcript of Case studies of Chinese ODA in the Philippines
COMPROMISING THE RULE OF LAW:Case studies of Chinese ODA in the Philippines
Rule of law
The rule of law is a principle of governance in which all persons, institutions and entities, public and private, including the State itself, are accountable to laws
that are publicly promulgated, equally enforced and independently adjudicated, and which are consistent with international human rights norms and standards.
Rule of law
The rule of law is a principle of governance in which all persons, institutions and entities, public and private, including the State itself, are accountable to laws
that are publicly promulgated, equally enforced and independently adjudicated, and which are consistent with international human rights norms and standards.
Rule of law
It requires, as well, measures to ensure adherence to the principles of supremacy of law, equality before the law, accountability to the law, fairness in
the application of the law, separation of powers,
participation in decision-making, legal certainty,
avoidance of arbitrariness and procedural and
legal transparency.
Rule of law
It requires, as well, measures to ensure adherence to the principles of supremacy of law, equality before the law, accountability to the law, fairness in the
application of the law, separation of powers,
participation in decision-making, legal certainty,
avoidance of arbitrariness and procedural and legal
transparency.
Chico River Project
• Chico River Pump Irrigation Project (CRPIP)
• To provide ample and stable water supply to 8,700 ha of agricultural land through diversion and canal systems
• To increase productivity and benefit some 4,300 farmers in 21 barangays
Kaliwa Dam Project
• New Centennial Water Source-Kaliwa Dam Project (NCWS-KDP)
• To supply some 600 million liters of water/day and benefit some 17.5 million people or about 3.5 million households in Metro Manila and neighboring provinces of Rizal and Quezon
Kaliwa Dam Project
• To reduce the current 97% dependence on the AngatDam
Particulars CRPIP NCWS-KDP
Build, Build, Build
program
Yes Yes
Belt and Road Initiative
of China
Yes Yes
Source of Funding ODA (China) –
Export-Import Bank of China
(CEXIM)
(previously to be funded from the
General Appropriations Act)
ODA (China) –
Export-Import Bank of China
(CEXIM)
(previously to be funded under a
Public-Private Partnership)
The CRPIP vis-à-vis the NCWS-KDP
Particulars CRPIP NCWS-KDP
Environmental concerns Environmental degradation, widespread flooding, disturbing the
biodiversity in the area
Pre-mature issuance of
Environmental Compliance
Certificate (ECC)
Socio-cultural issues Faulty consultation with Indigenous Peoples (Free, prior and informed
consent)
The CRPIP vis-à-vis the NCWS-KDP
Particulars CRPIP NCWS-KDP
Selection of contractor Contractor: China CAMC
Engineering Co. Ltd (CAMCE)
No transparency in selection
Involved in anomalous project
Contractor: China Energy
Engineering Corporation (CEEC)
With audit findings – negotiated
contract from the inception of the
bidding process
Interest rate The Chinese loans had higher interest rates than other ODAs.
According to the Philippine government, though they are higher than
other ODAs, they are still lower than commercial rates.
The CRPIP vis-à-vis the NCWS-KDP
Comparative interest rates
ProjectFunding
Country
Total Cost
(in Billion
Peso)
Interest
Rate
(p.a.)
Tenor
(in years)
Chico River Pump Irrigation Project China 4.37 2.00 20
Kaliwa Dam Project China 12.20 2.00 20
Panguil Bay Bridge South Korea 7.38 0.14 40
New Cebu International Container Port South Korea 9.20 0.15 40
Improvement of Sections along Pasig River from
Delpan Bridge to Napindan ChannelJapan 1.00 0.18 40
Cavite Industrial Area Flood Risk Management Project Japan 9.89 0.26 40
Metro Manila Subway-Phase 1 Japan 356.96 0.09 40
North-South Commuter Railway Extension Project Japan 628.42 0.08 40
Sovereign immunity
Section 3, Article XVI of the Philippine Constitution
“The State may not be sued without its consent”
Sovereign immunity
Article 8.1 of the CRPIP loan agreement
“The Borrower hereby irrevocably waives any immunity on thegrounds of sovereign or otherwise for itself or its property inconnection with any arbitration proceeding”
Article 5.7 of the NCWS-KDP loan agreement
“Neither the Borrower nor any of its assets is entitled to anyright of immunity on the grounds of sovereign or otherwise fromarbitration”
Confidentiality
Section 21, Article XII of the Philippine Constitution
“Foreign loans may only be incurred in accordance with law andthe regulation of the monetary authority. Information on foreignloans obtained or guaranteed by the Government shall bemade available to the public.”
Confidentiality
Article 8.8 of the CRPIP loan agreement
“The Borrower shall keep all the terms, conditions, and thestandard of fees hereunder or in connection with this Agreementstrictly confidential.”
Article 8.9 of the NCWS-KDP loan agreement
“The Borrower shall keep all the terms, conditions, and thestandard of fees hereunder or in connection with this Agreementstrictly confidential.”
Arbitration
Article 8.5 of the CRPIP loan agreement
Arbitration will be before the China International Economic TradeArbitration Commission (CIETAC) in accordance with CIETAC’sarbitration rules
Article 8.5 of the NCWS-KDP loan agreement
Arbitration will be before the Hong Kong Arbitration Centre(HKIAC) in accordance with HKIAC’s arbitration rules
Approval of the Monetary Board
Section 20, Article VII of the Philippine Constitution
“The President may contract or guarantee foreign loans on behalfof the Republic of the Philippines with the prior concurrence ofthe Monetary Board, and subject to such limitations as may beprovided by law.”
• CRPIP loan agreement was signed on 10 Apr 2018, but wasapproved by the Monetary Board on 17 May 2018
Response of government
• The loan agreements have been vetted and above board
• The controversial provisions are standard for Chinese contracts
• Provision on waiver of immunity is irrelevant as the Philippines is a responsible borrower and will not default on its payments
Conclusions
• The loans from China for the CRPIP and the NCWS-KDP are disadvantageous to the Philippines, based on interest rates and other loan terms
• The agreements signed with China contain provisions inconsistent with the laws of the Philippines
• Despite audit reports and other serious allegations against the Chinese-funded infrastructure projects, the wheels of accountability do not seem to have been put into motion
Conclusions
• There is a severe lack of transparency about the agreements fromthe very start
• China leveraged the special friendship extended by thePhilippine government
Conclusions
• Tenets of rule of law were disregarded
o Procedural and legal transparency
o Participation in decision-making
o Avoidance of arbitrariness
o Independently adjudicated
o Supremacy of the law
o Accountability to the law
Conclusions
• The adherence to the rule of law has been compromised in the two Chinese-funded infrastructure projects
• The funds for these projects may be described and termed as corrosive investments
• These come from authoritarian regimes and undermine democratic processes and institutions in the receiving countries
Conclusions
• These investments can actively exploit and amplify governance gaps, undermine democratic institutions, and make countries more susceptible to political and economic manipulation
• Without strong accountability, transparency, and oversight mechanisms, the adverse impacts of such sharp power can go unnoticed and unchallenged
Thank you!
